Measures of Solvency and Credit Risk
Shown Below Are Selected

question 52

Essay

Measures of solvency and credit risk
Shown below are selected items appearing in a recent balance sheet of Grant Products. (Dollar amounts are in thousands.)
(a) Compute the following:
(1) Total quick assets $____________
(2) Total current assets $____________
(3) Total current liabilities $____________
(4) Quick ratio ______ to 1
(5) Current ratio ______ to 1
(b) Research indicates an industry average quick ratio is 1.3 to 1, and a current ratio of 2.3 to 1. Based upon this information, does Grant Products appear more or less solvent than the average company in its industry? Explain briefly.
$$\begin{array} { | l | r | } \hline \text { Cash and cash equivalents } & \$ 620 \\\hline \text { Investments in marketable securities } & \$ 300 \\\hline \text { Receivables } & \$ 1,400 \\\hline \text { Inventories } & \$ 1,100 \\\hline \text { Prepaid expense and other current assets } & \$ 450 \\\hline \text { Plant and equipment } & \$ 3,300 \\\hline \text { Accounts payable } & \$ 1,600 \\\hline \text { Bank loans payable within one year } & \$ 300 \\\hline \text { Income taxes payable } & \$ 300 \\\hline \text { Retained earnings } & \$ 1,700 \\\hline\end{array}$$

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Definitions:

Bacteria

Microorganisms that are often single-celled, which can be found in various environments, and can have beneficial or harmful effects on other organisms.

Protobionts

Hypothetical precursors to living cells, consisting of self-organized spheres of organic molecules, instrumental in the origin of life.

Heterotrophs

Organisms that obtain their energy by consuming other organisms, unable to produce food internally.

Organic Molecules

Chemical compounds containing carbon that are found in living organisms, including carbohydrates, proteins, lipids, and nucleic acids.